FOLLOWING UP on his direction some time ago, President Joko Widodo has issued Presidential Decree Number 15 of 2021 related to the Proudly Made in Indonesia National Movement (Gernas BBI) team. Chaired by the Coordinating Minister for Maritime Affairs and Investment, the main target is to host local products in his country.
The sluggish economy requires business leaders to target the global market and Indonesia is one of the world's largest markets. Moreover, Indonesian household consumption contributes significantly to economic growth and gross domestic income. In the second quarter of this year, the contribution was 55.07%. Slightly lower than 2019 (56.62%) and 2020 (57.66%). What should be done so that Indonesian consumers make local products their first choice?
National identity and consumption
National identity is characterized by the feelings, attitudes and behavior of consumers (both individual and national) (Carvalho et al, 2019). Manifestations can be related to patriotism (love and loyalty to the nation), ethnocentrism (superiority to other nations), antipathy to other nations, and high nationalism.
For consumers, consuming products made in their country is a form of strengthening their national identity. The higher a nation's national identity, the love for the Motherland is facilitated by consuming domestic products. This consumption is also a form of support for the nation's children so that they can continue to have jobs to support their families.
Eleven years in a row, China has become the largest car market in the world. Local brands now control more than 50%, which was unimaginable 20 years ago. This percentage is even greater for electronic products. In fact, for digital marketplaces , local players control more than 80%.
With the Made in China 2025 , 10 strategic industries have been determined to be the locomotive of economic growth with large domestic market control. These include robots for industry or high-tech medical devices which must dominate the domestic market by more than 70%.
What about Japan? As the third largest car manufacturer in the world, automotive is one of the pillars of its economy. In fact, 89% of the manufacturing sector is related to automotive, with a workforce of up to 5.5 million people in 2020. Of the 4.5 million cars sold last year, non-Japanese manufacturers had less than 3% of the market. This also applies to electronic products, although for smartphones the conditions are different from 10 years earlier.
South Korea also has a strong national identity and influences its people's consumption patterns. For automotive, the Hyundai and Kia duo controlled more than 82% in 2020. This has increased compared to pre-pandemic times, as evidence of support for the sustainability of local industry, which has supported the country's economy. The same thing also happens in the smartphone , namely Samsung controls almost 65%. Even though LG only has one tenth, this local brand duo controls 70%. Consuming local products is a form of economic nationalism, with national identity as its shape.
Economic nationalism
Popular after the 2008 economic crisis, economic nationalism believes in the importance of economic activity to fulfill the nation's goals (Helleiner, 2020). It is not surprising that in the last decade many elected state leaders have put forward economic nationalism or protectionism. Questioning the benefits of globalization, the role of the state that needs to be played to protect the domestic economy from global capitalism is on the agenda.
International trade data managed by the World Bank shows that international trade volume in 2019 increased 2.89 times compared to 2000. The country with the largest surplus (exports greater than imports) is the United States. The surplus is more than half of imported products.
Singapore's international trade volume is 1.54 times compared to Indonesia, with a 20% surplus from imports. Interestingly, China, with its 'world factory' status, has a deficit of 5.58 times compared to Indonesia's export volume.
However, there is a trend in China, Japan and South Korea which have lower deficit percentages compared to 2000 or 2010. The same trend is also experienced by Indonesia, which shows that economic nationalism is real.
Recommendation
Economic recovery after being hampered by Covid-19 for the past two years is the main agenda of all state leaders. Economic nationalism will mean nothing without support from the people by consuming domestically made products. Moreover, Indonesia has the 7th largest market size in the world. This advantage can certainly be utilized to accelerate national economic recovery.
The size of the Indonesian market guarantees economies of scale for local companies to learn, build capabilities and grow (Malerba et al., 2017) and become a locomotive for Indonesia's growth.
The domestic market became the first foothold for South Korea from the early 1990s to the early 2000s. This is so that it is able to carry out technological catching-up with sufficient economies of scale. Japan carried out the same strategy in the early 1960s, before dominating the world automotive and electronics market starting in the 1980s, or China's efforts starting in the early 2000s, to become a producer of high value added goods with the Made in China 2025 . build national identity well. This national identity will form a country's economic nationalism without objections from other countries at the WTO.
The movement to be proud of what is made in Indonesia is not enough to move the nation to consume it. A structured, systematic and massive effort is needed to increase Indonesian consumers' identification with their nation's products, both cognitively, emotionally and evaluatively. This can be done if the quality of Indonesian products is superior at competitive prices compared to products from other nations.
